Category: Banking

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Australia Banking Crypto News Gemini

CBA Makes Investment in Winklevoss Twins’ Gemini in $400 Million Fund Raise

The Winklevoss twins have several claims to fame, the least of which is founding one of the more successful exchanges in the world, Gemini. This week, the company announced a US$400 million fund raise to further grow the business, with a rather surprising investor participating in the investment – Australia’s largest bank, the Commonwealth Bank of Australia (CBA).

Gemini Valued at $7 Billion

After self-funding the business for the past seven years, the Winklevoss twins have raised Gemini’s first round of capital, bringing the company’s valuation to US$7.1 billion. After enjoying success in Singapore, the company announced earlier this year it would be expanding into Australia.

While the twins retain 75 percent ownership in the company, it is estimated that their net worth would almost double from US$6 billion to US$10 billion as a result of the deal. The investment round was led by digital asset giant Morgan Creek Digital, to the tune of U$75 million, and included several others including Jay-Z’s Marcy Venture Partners and CBA.

It is believed that part of the investment would be to expand the company’s reach into the metaverse, a theme the brothers picked up in early 2021, ahead of arch-rival Mark Zuckerberg. Zuckerberg’s Facebook recently rebranded to Meta as part of the company’s move into the space, but it has been met with much derision.

There’s these two parallel paths, in terms of technology right now …There’s a centralised path, like Facebook or Fortnite, that is one step away from being a metaverse, and that’s totally fine. But there is another path, which is the decentralised metaverse and that’s the metaverse where we believe there’s greater choice, independence and opportunity, and there is technology that protects the rights and dignity of individuals.

Cameron Winklevoss, co-founder, Gemini

CBA’s Surprise Investment

CBA’s investment into Gemini is surprising in one sense, but entirely predictable on the other. On the one hand, you have a situation where traditional banks, including CBA, have been debanking crypto businesses in Australia, allegedly on the basis of operational and/or compliance risk. Cynically, you could argue that compliance was used as a guise to stifle competition and prevent the outflow of funds onto exchanges.

However, on the other hand, you see CBA taking the lead by its recent announcement that clients could buy crypto directly through its app, incidentally through a partnership with Gemini.

As traditional banks start to feel the squeeze of customers’ funds pouring onto crypto exchanges, it isn’t surprising that they would like to retain control of the funds on their own platform – or, failing which, investment in platforms benefiting from such outflows.

In this case, if you can’t beat them, invest in them.

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Australia Banking Crypto News Regulation

AUSTRAC Issues Debanking Statement: ‘Australian Banks At Risk’

Australia’s anti-money laundering regulator AUSTRAC has issued a statement warning banks against closing accounts. The context is, just because a business deals in bitcoin doesn’t mean it should automatically be debanked.

In the statement, released on October 29, AUSTRAC said Australian banks needed better systems to deal with assessing risk rather than simply debanking customers. “Businesses vulnerable to exploitation should not automatically have their accounts closed simply to avoid managing risk,” the financial watchdog stated.

Although the decision to close an account may remain a necessary risk control, AUSTRAC considers that with appropriate systems and processes in place, banks should be able to manage high-risk customers, including those operating remittance services, digital currency exchanges, not-for-profit organisations (NPOs) and financial technology (FinTech) businesses.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) statement

AUSTRAC expects banks to assess risk on a case-by-case basis, rather than just close accounts based on suspicion or caution. “AUSTRAC expects banks and all regulated businesses to adopt a case-by-case approach to managing AML/CTF (anti-money laundering/counter-terrorism financing) risks. This expectation extends to the importance of continuing to assess the particular risks relating to their business customers.”

In AUSTRAC’s view, the effect of debanking of legitimate and lawful financial services businesses can only increase the risks of money laundering and terrorism financing, and will negatively impact Australia’s economy as a result. Account closures have also created problems for regulators as they no longer have easy access to the debanked’s financial transactions.

In its statement, AUSTRAC addressed the issue of sector-wide debanking and aimed its message at discouraging the indiscriminate and widespread closure of accounts across entire financial services. This comes after many crypto businesses and individuals have been targeted and debanked without notice, under the guise that they posed a risk to the bank’s obligation to comply with AML and CTF laws. The large-scale account closures have damaged Australian-based Bitcoin exchanges and crypto traders’ businesses.

Australian Banks Highly Risk-Averse

Banks’ fear of being fined, coupled with the lack of transparency and clarity around these laws, has caused them to err on the side of caution, which has resulted in the wide-scale debanking of many businesses and individuals just because they deal in cryptocurrency and remittance services.

Yet banks have real reason to be cautious in Australia, because the consequences are harsh. If a bank is found not to be complying with AUSTRAC’s AML and CTF regulations, heavy fines apply, and they can cop a lot of bad press as well – as did Westpac in 2013, where the media were quick to print headlines relating to the bank’s involvement in one of the world’s biggest money-laundering schemes.

In recent years, the Commonwealth was fined A$700 million and Westpac fined A$1.3 billion for AML and CTF breaches. In June, National Australia Bank revealed it had been warned by AUSTRAC of “potential serious and ongoing non-compliance” with Know Your Customer (KYC) identification procedures, and last month the ANZ settled a debanking case brought by Canberra bitcoin trader Allan Flynn.

What is AUSTRAC and How Does It Work? 

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the Australian government’s anti-money laundering regulator. It literally follows the money in order to protect Australians from criminal activity. How it does this is explained in the below video:

 

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Banking Crypto News DeFi Stablecoins

$1 Trillion Banking Giant ING ‘Exploring’ Peer-To-Peer DeFi Lending

In the world of crypto, 2021 has been a watershed year – from bitcoin becoming legal tender to NFT mania and then, of course, the absolute explosion in DeFi. Traditional finance is scrambling to keep up with the pace of innovation. ING, the Dutch financial services giant, is the latest wanting to get in on the act.

ING Dips Toes into DeFi

ING, with US$1 trillion under management, made a presentation at the Singapore Fintech Festival where it announced that it was working on a trial of its DeFi, peer-to-peer lending protocol with the Netherlands Authority for the Financial Markets.

We are looking into peer-to-peer lending in a DeFi kind of setup. But then not on bitcoins. What is interesting to us is how you can probably create peer-to-peer lending or open up lending capabilities with different kinds of collateral. So with different ways of doing this rather than with volatile bitcoin.

Annerie Vreugdenhil, chief innovation officer, ING

In a white paper published earlier this year, ING outlined how lending protocol Aave, built atop the Ethereum blockchain, was one of the more promising examples of innovation in the industry. Leveraging smart contracts, Aave would enable borrowers to deposit crypto as collateral and take out stablecoin loans.

Despite recognising the benefits of DeFi (borderless payments, 24/7 operations and speed of transactions), the white paper noted several material drawbacks.

One main drawback highlighted by ING was that since borrowing and lending required collateral, it would not enable the creation of new money that could otherwise be used for financing entrepreneurial activities.

In short, ING’s objection appears to be that the very notion of DeFi runs counter to the foundation of fractional reserve banking, on which its entire business is founded. This concern from a legacy company is of course unsurprising, and time will tell how it reconciles current operations with DeFi.

DeFi Adoption Goes Parabolic in 2021

Since the beginning of the year, the total value locked in DeFi has increased more than tenfold. That said, there have been innumerable instances of hacks, leaks and breaches in 2021 – some of the higher-profile instances included Indexed Finance, Zabu Finance and C.R.E.A.M Finance.

While these hacks may serve to slow down adoption in the short run, traditional financial institutions would be well advised to keep their eye on the ball to ensure they are not left behind in the wake of unprecedented innovation.

As an example of an institution that doesn’t want to be left behind, consider Australia’s Commonwealth Bank, which last week announced that its customers would be able to buy crypto natively through its banking interface. If you can’t beat them, join them.

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Australia Banking Blockchain Crypto News

ANZ Banking Chief on Crypto: ‘There is a Weight of Money You Can’t Ignore’

Between 2009 and early 2020, crypto and traditional finance operated in parallel universes. Then in March 2020, everything changed. Crypto and macro became inseparable and among crypto proponents, it seemed obvious that traditional institutions such as banks would eventually capitulate. ANZ is the latest to see that crypto is here to stay.

First they ignore you, then they laugh at you, then they fight you, then you win.

Mahatma Gandhi

Traditional Finance Getting Onboard With Crypto

Earlier this week, as reported by Crypto News Australia, Commonwealth Bank (CBA) will become the first to offer crypto trading to its customers, natively through its app. CBA plans to offer its 11 million customers access to 10 cryptocurrencies including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Uniswap, Polygon, Filecoin, Aave and Compound. Other tokens and coins may be added in the future.

Shortly after CBA’s news, a local fintech and financial services webinar event organised by Blockchain Australia, called State of Play, sought to make sense of the current regulatory landscape and innovation in the sector:

ANZ Recognises CBA’s Move as ‘Bold’

Speaking of CBA’s recent move into the crypto space, ANZ Bank’s banking services portfolio lead Nigel Dobson described it as “bold”, suggesting this may be just the start of a major shift in the financial system and something traditional finance would need to embrace or adapt to.

There is a weight of money you simply can’t ignore … We have concluded that this is a major protocol shift for financial market infrastructure.

Nigel Dobson, ANZ banking services portfolio lead

Dobson went further, recognising the value of a decentralised system:

We are moving to a more decentralised system – arguably faster, cheaper, better (yet to be proven) – that can generate new outcomes and business models that can’t be ignored. If that’s the thesis – that these new protocols can generate better outcomes and new business models – then they can’t be ignored. We’re excited about them because they resemble, in many cases, financial markets.

Nigel Dobson, ANZ banking services portfolio lead

Ultimately, Dobson felt that much like the inevitability of the internet and changes it brought to banking, a shift to the digital asset economy was “completely going to occur”.

The preferences of our customers may lead us to places where we feel uncomfortable … but the ship has sailed … so what we need to do is to navigate our path towards utilising these [decentralised] networks. And the power of these networks is unquestionably strong. The power of networks transcends all companies – you just need to choose whether to be part of it or ignore it … I think we have a much stronger bias to participate than ignore.

Nigel Dobson, ANZ banking services portfolio lead

These sentiments from ANZ represent a remarkable change of tone given that the bank has previously been involved in debanking crypto businesses due to the perceived risk they posed. Just earlier this month, ANZ settled a case with a crypto trader after he was debanked solely on the basis of his profession.

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Banking Cryptocurrencies

CBA Becomes the First Bank in Australia to Support Crypto Purchases

The Commonwealth Bank of Australia (CBA) officially announced today, November 3, 2021, that it will be adding cryptocurrency services to its CommBank mobile app, which include the ability to buy, sell and hold crypto.

The CBA has partnered with cryptocurrency exchange Gemini and blockchain analytics firm Chainalysis to provide the infrastructure support needed to provide the exchange and custody services.

Australia’s First Bank to Support Crypto

Over the past couple of years, Australian banks have been trialling blockchain technology to ensure bank guarantees and cross-border payments, but as one of the ‘Big Four’ banks in Australia, the big move by the CBA to support cryptocurrencies is surprising.

CBA CEO Matt Comyn explains the dual reason for the move is growing demand from customers and the emergence of new competition:

The emergence and growing demand for digital currencies from customers creates both challenges and opportunities for the financial services sector, which has seen a significant number of new players and business models innovating in this area.

CBA CEO Matt Comyn

Comyn is also hosting a couple of events on November 9 and 10 where CBA customers can ask questions to get more information on the new services.

Up to 10 Cryptos Supported

As stated by the CBA: “The pilot will start in the coming weeks and CBA intends to progressively roll out more features to more customers in 2022.” The bank will provide customers with access to up to 10 selected crypto assets including:

  1. Bitcoin
  2. Ethereum
  3. Litecoin
  4. Bitcoin Cash
  5. Uniswap
  6. Chainlink
  7. Polygon
  8. Filecoin
  9. Aave
  10. Compound

Crypto Banking Controversy

Just recently we saw a local Bitcoin trader file a lawsuit against two of the Big Four Australian banks, claiming they terminated his banking services on the basis that he operated a crypto trading platform. One of them, the ANZ, has already settled.

Whilst this announcement from Commonwealth Bank is certainly a promising sign that Bitcoin is further establishing itself within the mainstream spotlight, there needs to be further education for users that taking control and ownership of your digital assets is still an incredibly important element of this technology. No longer do we need to hand over the keys to our wealth to banks or third-party organisations

Chris Pavlesic, CEO and founder, Coinstop

Today’s news raises more questions than answers. Will we now see a change in attitude from banks towards cryptocurrencies? Will the banks now control our private keys? What other banks might jump on the bandwagon? And what other services and coins will be introduced in the future?

With an expected five million Australians owning cryptocurrencies in 2021, it seems a timely move by the CBA to capture some of the capital and stop the huge outflow of money from bank accounts to crypto exchanges.

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Banking CBDCs Crypto News Nigeria Payments

Nigeria Becomes First Leading African Economy to Launch a CBDC

The Nigerian government has finally released the eNaira, the African nation’s central bank digital currency (CBDC), joining the league of countries already pioneering the CBDC space, including China, Sweden, and the Bahamas.

Nigeria Mints $1.2 Million Worth of eNaira

The October 25 launch of the eNaira was officiated by President Muhammadu Buhari and, for the record, the Nigerian CBDC is the first to launch in the whole of sub-Saharan Africa. About 33 local banking institutions, more than 120 merchants and 2,000 customers were already registered on the platform before launch. 

The first eNaira mint by the central bank was worth about 500 million Naira (over US$1.2 million), of which 200 million Naira (US$487,555) in eNaira has been distributed to the banks. The digital currency is designed to complement the existing national currency and payment systems and not replace them.

During the launch, the governor of the central bank, Godwin Emefiele, said the digital currency would drive a more cashless, inclusive, and digital economy: “The eNaira will make a very significant positive difference to Nigerians and Nigeria.”

Both the native eNaira speed wallet and eNaira merchant wallet applications are now available for download on Google Play Store.

Why Was the eNaira Launch Delayed?

As Crypto News Australia reported last month, the eNaira was initially scheduled to launch on October 1 to commemorate the country’s independence day. However, there were other key activities that led the Central Bank of Nigeria (CBN) to postpone the launch indefinitely. 

At least one report claimed the central bank delayed the launch in order to stress-test and recalibrate the eNaira system to ensure its efficiency, security, and scalability.

Interest in cryptocurrencies such as bitcoin has skyrocketed in Nigeria, either as an investment vehicle or a better means for cross-border payments, despite the central bank banning banks from serving local crypto exchanges and companies.

While the launch of the eNaira is a milestone for the country, it remains to be seen if Nigerians will confidently embrace it as much as they do bitcoin, given the CBDC is still within the government’s reach. 

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Banking CBDCs Crypto News Industries Institutions

French CBDC Trial Incorporating Smart Contracts Heralded a Success

Banque de France, the French central bank, has successfully completed its 10-month trial using Central Bank Digital Currencies (CBDC) in the country’s debt market.

The trial was led by Euroclear, a Belgium-based financial services company that specialises in the settlement of securities transactions. The trial also included many of France’s largest banks, as well as the French public debt office and the central bank, which used a permissioned blockchain-based system developed by IBM on Hyperledger Fabric.

We have together successfully been able to measure the inherent benefits of this technology, concluding that the CBDC can settle central bank money safely and securely.

Isabelle Delorme, Euroclear executive

According to the report released by Euroclear, the pilot was launched in March 2020 by Banque de France to explore the uses of a digital currency issued by the central bank. The continued research and development of a CBDC for the settlement of government bonds and securities has been adjudged a success, according to Euroclear:

It showed that CBDC can be effectively used to support the settlement of securities in central bank money and that it is possible to run post-trade operations for an activity as critical for the capital markets as the management of OATs [order audit trail system].

Euroclear report

Enhancing the Traditional System

Typically, deals are reconciled between parties, recorded and assets transferred to a single centralised authority such as a central bank or securities depository. This process usually pushes out the time settlement takes and increases costs due to intermediaries.

This experiment made it possible to demonstrate the possibilities of interaction between conventional and distributed infrastructures. It also paves the way for other alliances in order to benefit from the opportunities offered by financial assets in a blockchain environment.

Nathalie Aufauvre, general director of financial stability and operations, Banque de France

The project tested use cases of a CBDC in a range of everyday activities, such as issuing new bonds, using them in repurchase agreements, as well as paying coupons and redeeming deals.

Dedicated smart contracts were developed to test the handling of coupon payments based on the holdings of securities tokens. Payments were automatically prepared at defined dates and automatically settled in CBDC at defined payment dates on the blockchain platform.

Smart contracts have the ability to provide more autonomy to capital market participants while maintaining the control imposed by regulators on a blockchain platform.

Landmark for CBDCs

According to Soren Mortensen, global director of financial markets at IBM, the project “went well beyond previous blockchain initiatives” because it successfully trialled “most central securities depository and central bank processes” while eliminating existing interim steps such as reconciliation between market intermediaries. Blockchain could therefore facilitate a reduction of the settlement cycle, leading to capital and margin cost reductions.

Veteran policymaker Benoît Cœuré warned central banks last month to act more quickly to develop official digital assets because new technologies such as decentralised finance posed a threat to banks and other depository institutions.

Due to the nature of Distributed Ledger Technology (DLT), it is possible to process transactions without the need for an intermediary, reducing fees and increasing speed, while transactions remain completely traceable and transparent. Policymakers are worried that private sector initiatives around payments and cryptocurrency issuance could lead to central banks losing control of monetary policy, therefore spurring the uptake of CBDCs.

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Australia Banking Bitcoin Crypto News Cryptocurrency Law Trading

Precedent Set? ANZ Settles Debanking Case Brought by Bitcoin Trader

Allan Flynn, crypto trader and owner of Australian local exchange BitcoinCanberra, has settled his first complaint with the ANZ bank after being debanked because of his occupation as a digital currency exchange (DCE).

The bitcoiner announced the settlement in a Tweet late last week:

Flynn had lodged a claim against two of Australia’s biggest banks 20 months earlier after both had debanked him. The claim with ANZ has been settled but another continues with Westpac, to be heard later this week.

Understanding Debanking

‘Debanking’ is a recently coined term that refers to the process in which financial institutions, such as retail banks, cease delivering services to customers for whatever reason. Flynn was debanked by ANZ and Westpac based on his occupation as a crypto trader and for offering trading services to clients. Flynn alleged his human rights had been discriminated against because he ran a crypto operation.

ANZ released a statement in which it said:

ANZ acknowledges that it closed Mr Flynn’s accounts because it detected he was operating a DCE (digital currency exchange), and without seeking information from Mr Flynn about the particular circumstances of his DCE business, including the ML/TF (money laundering/terrorism financing) risks and policies of that business.

ANZ statement

At the moment, ANZ and other major financial institutions in Australia refuse to bank with operators of DCEs due to concerns of non-compliance with money laundering and terrorism financing risks.

Aussie Businesses Being Debanked

Flynn’s case is no longer unique, and people are starting to wonder about the motives behind debanking. Last month, Fintech Australia CEO Rebecca Schot-Guppy and 150 members of her organisation had been debanked with no apparent cause or means to appeal.

Michaela Juric, founder of Bitcoin Babe, has said that her banking services had been terminated 91 times since establishing her crypto brokerage firm seven years ago. Juric stated that some of her family members had also been affected, making it difficult for them to access utilities such as electricity, internet, water and insurance.

Local Australian brokerage Aus Merchant has been debanked four times in the past year. Managing director Mitchell Travers has concluded that anti-competitive practices might have been the true motive behind these decisions.

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Banking Bitcoin Crypto News Cryptocurrencies Institutions

Morgan Stanley CEO Admits Crypto ‘Isn’t a Fad’

Cryptocurrencies may not constitute a significant part of the business demand for Morgan Stanley, a top US investment financial institution, but chairman and CEO James Gorman believes they are not going away.

There are people who still argue in some way that bitcoin and digital currencies are “bubble”, not mindful of the fact that the sector has developed for over 10 years with a current market capitalisation of US$2.5 trillion.

Last week, JPMorgan CEO Jamie Dimon reiterated his view that bitcoin is “worthless” – he has in the past also referred to the asset as “a fraud”, and “fool’s gold”.

Taking a somewhat contrary view, Gorman said this week that cryptocurrencies are not a fad.

I don’t think crypto’s a fad, I don’t think it’s going away […] I don’t know what the value of bitcoin should or shouldn’t be, but these things aren’t going away and the blockchain technology supporting it is obviously very real and powerful.

James Gorman, CEO and chairman, Morgan Stanley

Crypto ‘Will Evolve’ and ‘We’ll Evolve With It’

Morgan Stanley is one of the few major financial institutions to have launched crypto-related investment products, just as global investors are shifting away from gold to emerging crypto assets. In April, the bank filed notice to offer a bitcoin investment product to its wealth management clients. 

Although its crypto offering isn’t pivotal to the bank just yet, Gorman said it “may evolve”. 

For us, honestly it’s just not a huge part of the business demand for our clients. That may evolve and we’ll evolve with it, but certainly it’s not what’s driving our economics one way or the other.

James Gorman, CEO and chairman, Morgan Stanley

Despite Gorman’s comments, Morgan Stanley – which reported net earnings of US$14.8 billion for the third quarter – has showed particular interest in crypto this year. Its US$150 billion investment unit Counterpoint Global explored bitcoin in February, and the firm purchased more than 28,000 shares in Grayscale’s Bitcoin Trust in June.

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Banking CBDCs Crypto News Payments Worldwide

Study Postulates: Nearly 45% of Consumers Around the World Will Use Crypto for Payments by 2023

According to a report on worldwide payments by the Capgemini Research Institute, the global leader in independent analysis, the payment industry “faces intensifying, multi-dimensional disruption” with next-gen payment methods like cryptocurrency increasing to 45 percent usage within the next two years.

Capgemini surveyed customers and industry stakeholders to provide an overview of the current global payments landscape. The research team analysed statistics from the Bank of International Settlements, the European Central Bank, the International Monetary Fund, the World Bank, and other central banks.

The report details how payment networks aim to become faster and more cost-effective. Capgemini predicts nearly 45 percent of customers will use the cryptocurrency payment method within the next one to two years due to the growing need for cross-border payments in addition to concerns about high transaction fees.

Newfound Payment Technology Drives Regulators to Mitigate Risk

The study states that the outlook for cryptocurrencies and stablecoins is “hazy”, citing the mixed reactions to crypto assets by governments and regulators around the world.

According to the report, regulators are focused on Key Regulatory and Industry Initiatives (KRIIs), which recently have been centred on customer protection and risk mitigation for new payment methods. The nature of cryptocurrency means there are very low barriers to entry – anyone, knowledgeable or not, can use the technology, creating a potential financial risk to novices as well as exposure to illicit financial activity.

Capgemini reported that Russia, India and the United Arab Emirates see potential in the adoption and regulation of crypto assets and stablecoins. Meanwhile, the study also noted other countries such as China and Egypt have moved to ban crypto assets due to the rising risk of illicit transactions.

CBDCs as an Alternative to Private Cryptocurrencies

Central banks want to leverage blockchain technology such as smart contracts in order to better manage monetary policy functions like money supply, interest rates, and direct stimulus payments to individuals. Therefore CBDCs have become a trending topic for banks and regulators alike.

CBDCs aim to facilitate frictionless payments and create a gateway for the unbanked to join the digital economy as the payments landscape evolves. Considering the potential benefits of CBDCs, several central banks have started experimenting with the technology.

Currently, the main challenges for CBDCs are that the ecosystem requires collaboration with payment infrastructure companies and various other entities. With the current hype and speculation, it’s important that the necessary action is taken with regards to “implementation, migration, tax structures, settlement speed, governing regulation, integration of players, and checks and controls”.

If introduced, retail CBDCs should be developed and implemented through public/private sector collaboration from the start to ensure that deployment complements other payment methods and leverages payment service providers’ expertise, market knowledge, and customer relationships.

Etienne Goosse, director general, European Payments Council, Belgium

It may yet take years for the CBDC concept to transition to reality, according to the Capgemini study:

It’s too soon to count on nascent central bank digital currency (CBDC) as an alternative to unregulated cryptocurrencies or an additional pathway to financial inclusion.

Capgemini Research Institute

Crypto Credit Cards Spurring Adoption

Currently, major names including PayPal, Yum brands and Coca-Cola accept payments in crypto, but a major driving factor is crypto-linked cards “fuelled by global card player initiatives to create a fertile crypto-payment ecosystem”.

Cryptocurrency market volatility indicates a lack of maturity. Still, crypto-linked cards are taking the lead in the crypto-payments space.

Capgemini Research Institute